The labor contract usually assigns significant authority to the employer (hierarchical governance). The threat of hold-up of the employee by the employer, caused by this asymmetric distribution of decision rights, can be mitigated by a preference for reciprocity on the part of the employer or by...

We present an overlapping generations model with cultural transmission of preferences, in which players face in each period a two-stage coordination game that consists of a production stage followed by a distribution phase. In the globally stable steady state of society, there will be a mixed...